Car leasing in the UK: Things to look out for

Leasing a car is one of the most cost-effective ways to get behind the wheel of a new, reliable, and high-spec vehicle without having to splash out a large sum of money up-front – instead, you can pay for the car in monthly installments as you’re using it, then choose from a number of different options at the end of the contract depending on whether you want to keep the car or not.

If you’re looking to lease a vehicle in the UK, here are the top things to look out for, from car leasing specialists Vavoom! 

What type of lease agreement do you want?

You may be surprised to learn that there are multiple different types of leasing agreements when it comes to cars, each of which offers a different end result and payment plan, tailoring to what you’d like to happen at the end of the leasing period. Here is a brief overview of the different types of car leasing you may be offered in the UK:

• PCH – Personal Contract Hire is a type of car finance where you will have the lowest monthly payments, however, you will not own the car at the end of your agreement and you will not be offered the chance to purchase it either. This is a great choice for people who like to refresh their vehicle every two to three years. At the end of a PCH contract, you will hand your car back to the dealership at no extra cost, provided the car is in good condition and you have not exceeded the agreed maximum mileage set out in your contract.

• PCP – Personal Contract Purchase car finance operates in much the same way as a PCH deal would, but with slightly higher monthly prices and the option to purchase the car at the end of your contract. This purchase will be made via a pre-arranged ‘balloon payment’, which essentially accounts for the remainder of the value of the car that you are yet to pay during your finance package. Although you do have the option to purchase the car, you are under no obligation to do so and can hand back the vehicle in the same way you would during a PCH contract.

• Hire Purchase – Hire Purchase car finance agreements are a popular choice for people that are certain that they’d like to own their car at the end of their lease term, with the full value of the car being built into your monthly payments. Whilst this does mean that your monthly instalments will be highest in a Hire Purchase contract, you will own the car sooner and will likely pay less interest as a result – if you know that you want to end up owning the car, this could be the ideal choice for you! If you take out a Hire Purchase car finance deal, you will be obliged to purchase the car and you will not be able to hand back the vehicle for a newer model or upgrade.